-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DQo3/SQnYzK8ov51SgcE8JsmU/DVx/ukIGt64ccuIW3PWLKM8K40XYwUQZZ1TmXW KNPhyoHPOhFNJU0r9NlDpw== 0000892569-99-002383.txt : 19990906 0000892569-99-002383.hdr.sgml : 19990906 ACCESSION NUMBER: 0000892569-99-002383 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FURON CO CENTRAL INDEX KEY: 0000037755 STANDARD INDUSTRIAL CLASSIFICATION: GASKETS, PACKAGING AND SEALING DEVICES & RUBBER & PLASTIC HOSE [3050] IRS NUMBER: 951947155 STATE OF INCORPORATION: CA FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11425 FILM NUMBER: 99705901 BUSINESS ADDRESS: STREET 1: 29982 IVY GLENN DRIVE CITY: LAGUNA NIGUEL STATE: CA ZIP: 92677 BUSINESS PHONE: 7148315350 MAIL ADDRESS: STREET 1: 29982 IVY GLENN DRIVE CITY: LAGUNA NIGUEL STATE: CA ZIP: 92677 FORMER COMPANY: FORMER CONFORMED NAME: FLUOROCARBON CO DATE OF NAME CHANGE: 19900322 10-Q 1 FORM 10-Q FOR THE QUARTER ENDING JULY 31, 1999. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JULY 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 000-8088 FURON COMPANY (Exact name of registrant as specified in its charter) California 95-1947155 - ---------------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 29982 Ivy Glenn Drive Laguna Niguel, CA 92677 - ---------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (949) 831-5350 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Number of shares of common stock outstanding as of August 31, 1999: 18,508,997 1 2 FURON COMPANY INDEX
PAGE NO. -------- PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Condensed Consolidated Balance Sheets July 31, 1999 and January 30, 1999 3 Condensed Consolidated Statements of Income Three months and six months ended July 31, 1999 and August 1, 1998 5 Condensed Consolidated Statements of Cash Flows Three months and six months ended July 31, 1999 and August 1, 1998 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 24 PART II - OTHER INFORMATION 25 - ---------------------------
2 3 ITEM 1. FINANCIAL STATEMENTS FURON COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
July 31, January 30, In thousands 1999 1999 - ------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 2,927 $ 1,358 Accounts receivable, less allowance for doubtful accounts of 72,630 81,885 $1,920 at July 31, 1999 and $2,232 at January 30, 1999 Inventories, net 60,606 53,650 Income taxes recoverable 2,737 3,368 Deferred income taxes 5,975 6,625 Prepaid expenses and other current assets 5,782 4,955 --------- --------- Total current assets 150,657 151,841 Property, plant & equipment, at cost: Land 6,711 6,711 Buildings and leasehold improvements 35,316 33,341 Machinery and equipment 176,127 171,986 --------- --------- 218,154 212,038 Less accumulated depreciation and amortization (111,298) (103,395) --------- --------- Net property, plant and equipment 106,856 108,643 Intangible assets, at cost less accumulated amortization of 86,465 89,695 $42,116 at July 31, 1999 and $39,101 at January 30, 1999 Other assets 9,850 11,922 --------- --------- TOTAL ASSETS $ 353,828 $ 362,101 ========= =========
See accompanying notes. 3 4 FURON COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
July 31, January 30, In thousands, except share data 1999 1999 - ------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 25,117 $ 26,130 Salaries, wages and related benefits payable 13,047 14,046 Current portion of long-term debt 443 566 Accrued interest payable 4,343 4,373 Facility rationalization and severance 5,446 6,554 Other current liabilities 11,568 14,649 --------- --------- Total current liabilities 59,964 66,318 Long-term debt 132,374 144,707 Other long-term liabilities 26,246 26,091 Deferred income taxes 19,332 20,378 Commitments and contingencies -- -- Shareholders' equity: Preferred stock without par value, 2,000,000 shares authorized, none issued or outstanding -- -- Common stock without par value, 30,000,000 shares authorized, 18,503,702 shares issued and outstanding at July 31, 1999 and 18,421,080 at January 30, 1999 43,832 42,806 Employee Benefit Trust shares (2,373) (1,444) Accumulated other comprehensive income (3,367) (1,691) Unearned ESOP shares (1,983) (2,560) Unearned compensation (93) (124) Retained earnings 79,896 67,620 --------- --------- Total shareholders' equity 115,912 104,607 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 353,828 $ 362,101 ========= =========
See accompanying notes. 4 5 FURON COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Six months ended ------------------------------------------------------ July 31, August 1, July 31, August 1, In thousands, except per share amounts 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------- Net sales $ 117,221 $ 125,046 $ 238,658 $ 244,851 Cost of sales 79,872 84,849 162,334 167,388 --------- --------- --------- --------- Gross profit 37,349 40,197 76,324 77,463 Selling, general and administrative expenses 26,267 29,271 54,249 56,832 Other (income), expense (1,105) (971) (1,678) (2,109) Interest expense, net 2,901 3,262 5,867 6,194 --------- --------- --------- --------- Income before income taxes 9,286 8,635 17,886 16,546 Provision for income taxes 2,210 2,720 4,919 5,212 --------- --------- --------- --------- Net Income $ 7,076 $ 5,915 $ 12,967 $ 11,334 ========= ========= ========= ========= Basic income per share $ 0.39 $ 0.33 $ 0.71 $ 0.63 ========= ========= ========= ========= Diluted income per share $ 0.38 $ 0.32 $ 0.70 $ 0.61 ========= ========= ========= ========= Cash dividends per share $ 0.03 $ 0.03 $ 0.06 $ 0.06 ========= ========= ========= =========
See accompanying notes. 5 6 FURON COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended Six months ended ------------------------------------------------------ July 31, August 1, July 31, August 1, In thousands 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 7,076 $ 5,915 $ 12,967 $ 11,334 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 4,793 4,331 9,207 8,604 Amortization 1,518 1,633 3,046 3,161 Provision for losses on accounts receivable 75 70 94 140 Deferred income taxes 911 (5) 1,131 (374) (Gain) loss on sale of assets (38) 40 (6) 102 Working capital changes, net of acquisitions and disposals: Accounts receivable 1,193 (267) 9,163 1,523 Inventories (4,554) 1,386 (6,956) (1,678) Accounts payable and accrued liabilities 2,987 (431) (2,011) (4,844) Income taxes payable, recoverable (3,406) 412 632 (152) Other current assets and liabilities, net 1,617 3,907 (2,711) 2,630 Changes in other long-term operating assets and liabilities 157 (412) (87) (324) --------- --------- --------- --------- Net cash provided by operating activities 12,329 16,579 24,469 20,122 INVESTING ACTIVITIES Acquisition of businesses, net of cash acquired -- (14,339) -- (11,417) Purchases of property, plant and equipment (3,792) (4,744) (7,913) (9,910) Proceeds from sale of businesses 6 276 15 281 Proceeds from sale of equipment 8 70 27 110 Decrease in note receivable (38) 776 (353) 170 --------- --------- --------- --------- Net cash used in investing activities (3,816) (17,961) (8,224) (20,766) FINANCING ACTIVITIES Proceeds from long-term debt 6 14,000 147 148,194 Principal payments on long-term debt (6,301) (13,672) (12,360) (138,013) Deferred debt costs (2) (246) (2) (4,164) Employee benefit trust funding (342) (342) (684) (1,642) Proceeds, net of cancellations, from issuance of common stock 683 16 959 153 Principal payments received from loan to ESOP 576 599 576 599 Dividends paid on common stock (555) (549) (1,108) (1,098) --------- --------- --------- --------- Net cash provided by (used in) financing activities (5,935) (194) (12,472) 4,029 EFFECT OF EXCHANGE RATE CHANGES ON CASH 349 48 (2,204) 492 --------- --------- --------- --------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 2,927 (1,528) 1,569 3,877 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -- 5,405 1,358 -- --------- --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,927 $ 3,877 $ 2,927 $ 3,877 ========= ========= ========= =========
See accompanying notes. 6 7 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999 (Unaudited) 1. GENERAL The accompanying unaudited consolidated financial statements have been condensed in certain respects and should, therefore, be read in conjunction with the consolidated financial statements and related notes thereto, contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 1999. Certain reclassifications have been made to prior year amounts in order to be consistent with the current year presentation. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary (consisting only of normal recurring adjustments) to present fairly the financial position of the Company as of July 31, 1999, and the results of operations and cash flows for the three and six months ended July 31, 1999 and August 1, 1998. Results of the Company's operations for the three and six months ended July 31, 1999 are not necessarily indicative of the results to be expected for the full year. 2. INVENTORIES Inventories, stated at the lower of cost (first-in, first-out) or market, are summarized as follows:
July 31, January 30, In thousands 1999 1999 - ------------------------------------------------------------ Raw materials and purchased parts $22,945 $21,388 Work-in-process 14,237 12,211 Finished goods 23,424 20,051 ------- ------- $60,606 $53,650 ======= =======
3. INTANGIBLES Intangible assets, primarily acquired in business combinations, net of accumulated amortization, are summarized as follows:
July 31, January 30, In thousands 1999 1999 - ------------------------------------------------- Goodwill $62,325 $64,297 Other intangible assets 24,140 25,398 ------- ------- $86,465 $89,695 ======= =======
7 8 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999 (Unaudited) 4. LONG-TERM DEBT Long-term debt is summarized as follows:
July 31, January 30, In thousands 1999 1999 - ------------------------------------------------------------ Senior Subordinated Notes $125,000 $125,000 Loans under bank credit agreements 4,000 16,000 due through fiscal 2002 Industrial Revenue Bonds 3,400 3,600 Other 417 673 -------- -------- Total long-term debt 132,817 145,273 Less current portion 443 566 -------- -------- Due after one year $132,374 $144,707 ======== ========
For the three and six months ended July 31, 1999, the weighted average interest rate on the loans under the credit facility agreement was 5.5% and 5.5%, respectively. Interest paid for the three and six months ended July 31, 1999 was $0.3 million and $5.7 million, respectively. Interest paid for the three and six months ended August 1, 1998 was $0.6 million and $2.6 million, respectively. 5. INCOME TAXES The Company's effective tax rate for the three and six months ended July 31, 1999 was 23.8% and 27.5%, respectively and 31.5% for the same periods in the prior year. The lower effective tax rates in the current year are primarily due to lower foreign income taxes resulting from the reorganization of foreign entities. Income taxes paid for the three and six months ended July 31, 1999 were $3.7 million and $3.9 million, respectively. Income taxes paid for the three and six months ended August 1, 1998 were $2.8 million and $4.9 million, respectively. 6. CONTINGENCIES At July 31, 1999, the Company had approximately $6.6 million of foreign currency hedge contracts outstanding consisting of over-the-counter forward contracts. Net unrealized losses from hedging activities were not material as of July 31, 1999. At July 31, 1999, the Company is obligated under irrevocable letters of credit totaling $5.8 million. 8 9 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999 (Unaudited) 6. CONTINGENCIES (CONTINUED) The Company is currently involved in various litigation. While no assurance can be given, management of the Company is of the opinion that the ultimate resolution of such litigation should not have a material adverse effect on the Company's consolidated financial position or results of operations. Compliance with environmental laws and regulations designed to regulate the discharge of materials into the environment or otherwise protect the environment requires continuing management effort and expenditures by the Company. While no assurance can be given, the Company does not believe that the operating costs incurred in the ordinary course of business to satisfy air and other permit requirements, properly dispose of hazardous wastes and otherwise comply with these laws and regulations form or are reasonably likely to form a material component of its operating costs or have or are reasonably likely to have a material adverse effect on its competitive or consolidated financial positions. As of July 31, 1999, the Company's reserves for environmental matters totaled approximately $1.5 million. The Company or one or more of its subsidiaries is currently involved in environmental investigation or remediation directly or as an EPA-named potentially responsible party or private cost recovery/contribution action defendant at various sites, including certain "superfund" waste disposal sites. While neither the timing nor the amount of the ultimate costs associated with these matters can be determined with certainty, based on information currently available to the Company, including investigations to determine the nature of the potential liability, the estimated amount of investigation and remedial costs expected to be incurred and other factors, the Company presently believes that its current environmental reserves should be sufficient to cover most, if not all, of the Company's aggregate liability for these matters and, while no assurance can be given, it does not expect them to have a material adverse effect on its consolidated financial position or results of operations. The actual costs to be incurred by the Company at each site will depend on a number of factors, including one or more of the following: the final delineation of contamination; the final determination of the remedial action required; negotiations with governmental agencies with respect to cleanup levels; changes in regulatory requirements; innovations in investigatory and remedial technology; effectiveness of remedial technologies employed; and the ultimate ability to pay of any other responsible parties. 9 10 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999 (Unaudited) 7. SHAREHOLDERS' EQUITY Earnings Per Share The calculation of earnings per share is presented below:
Three Months Ended Six Months Ended ----------------------------------------------------------- In thousands, except share and per share July 31, August 1, July 31, August 1, amounts 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------- Net income $ 7,076 $ 5,915 $ 12,967 $ 11,334 =========== =========== =========== =========== Weighted average shares outstanding for basic income per share 18,171,784 18,013,968 18,157,100 18,023,521 ----------- ----------- ----------- ----------- Effect of dilutive securities: Employee stock options and awards 558,234 545,999 484,584 603,771 ----------- ----------- ----------- ----------- Weighted average shares outstanding for diluted income per share 18,730,018 18,559,967 18,641,684 18,627,292 ----------- ----------- ----------- ----------- Basic income per share $ 0.39 $ 0.33 $ 0.71 $ 0.63 =========== =========== =========== =========== Diluted income per share $ 0.38 $ 0.32 $ 0.70 $ 0.61 =========== =========== =========== ===========
Employee Benefits Trust On March 24, 1998, the Company entered into an Employee Benefits Trust (the "Trust") with Wachovia Bank, N.A., Trustee. The Trust was established to provide a source of funds to assist the Company in meeting obligations under various employee benefit plans. During the six months ended July 31, 1999, the Company contributed approximately $0.7 million to the Trust to purchase shares of the Company's common stock on the open market. During the first six months of fiscal year 2000, the Trust purchased 44,257 shares of common stock at an average cost of $15.63 per share (140,341 shares held at July 31, 1999). Also, during the first quarter of fiscal year 2000, the Trust released 14,219 shares of common stock to plan participants in connection with the annual incentive plan awards. 10 11 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999 (Unaudited) 7. SHAREHOLDERS' EQUITY (CONTINUED) For financial reporting purposes, the Trust is consolidated with the Company. The shares are accounted for by the treasury stock method. The fair market value of the shares held by the Trust is shown as a reduction to shareholders' equity in the Company's consolidated balance sheet. Any dividend transactions between the Company and the Trust are eliminated. Shares will be released from the Trust as granted to participants in connection with various benefit plans. Common stock held in the Trust is not considered outstanding for earnings per share calculations until they are granted to participants. The Trustee is responsible for voting the shares of common stock held in the Trust. 8. COMPREHENSIVE INCOME As of February 1, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's net income or shareholders' equity. SFAS No. 130 requires the change in the minimum pension liability and the foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' equity, to be included in other comprehensive income. Prior years' financial statements have been reclassified to conform to these requirements. The components of comprehensive income, net of related tax, are as follows:
Three Months Ended Six Months Ended ------------------------------------------------- July 31, August 1, July 31, August 1, In thousands 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------- Net income $ 7,076 $ 5,915 $ 12,967 $ 11,334 Foreign currency translation adjustments 296 (190) (1,676) 576 -------- -------- -------- -------- Comprehensive income $ 7,372 $ 5,725 $ 11,291 $ 11,910 ======== ======== ======== ========
11 12 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999 (Unaudited) 9. SEGMENT INFORMATION The Company operates in two business segments: Commercial Products, including highly engineered seals and bearings, fluid handling components, tapes, films and coated fabrics, hose and tubing, wire and cable, and plastic formed components; and Medical Device Products, including critical care products and infusion systems for medical and surgical applications. The factors impacting the Company's basis for reportable segments include separate management teams, infrastructures, and discrete financial information about each. Additionally, the long-term financial performance of the Medical Device Products segment is affected by an environment governed by regulatory standards. Sales, operating profit, interest expense, net and identifiable assets are set forth in the following table:
Commercial Medical In thousands Products Device Products Adjustments Consolidated ---------------------------------------------------------------------------------------------------------------------- Three months ended July 31, 1999: ----------------------------------- Sales to unaffiliated customers $ 92,035 $ 25,186 $ 117,221 Operating profit 9,979 1,103 11,082 Interest expense, net -- -- $ 2,901 2,901 Identifiable assets 211,920 141,908 353,828 Six months ended July 31, 1999: ----------------------------------- Sales to unaffiliated customers $ 185,411 $ 53,247 $ 238,658 Operating profit 17,952 4,123 22,075 Interest expense, net -- -- $ 5,867 5,867 Identifiable assets 211,920 141,908 353,828 Three months ended August 1, 1998: ----------------------------------- Sales to unaffiliated customers $ 96,544 $ 28,502 $ 125,046 Operating profit 8,731 2,195 10,926 Interest expense, net -- -- $ 3,262 3,262 Identifiable assets 216,710 151,988 368,698 Six months ended August 1, 1998: ----------------------------------- Sales to unaffiliated customers $ 194,518 $ 50,333 $ 244,851 Operating profit 18,323 2,308 20,631 Interest expense, net -- -- $ 6,194 6,194 Identifiable assets 216,710 151,988 368,698
10. SUBSEQUENT EVENT During March 1999, the Company announced that it was exploring strategic alternatives for the Company's Dekoron wire and cable business unit, including its possible sale. Refer to Note 13 of the "Notes to Consolidated Financial Statements" of the Company's 1999 Annual Report on Form 10-K. On September 2, 1999, the Company announced that it had signed a definitive agreement to sell its Dekoron wire and cable business unit, including the products sold under the Dekoron and Unitherm brands, to Cable USA, Inc., a member of the Marmon group of companies. The sale is expected to be completed during the quarter ending October 30, 1999. Terms of the transaction were not disclosed. For the fiscal year ended January 30, 1999, the Dekoron wire and cable business unit had net sales of approximately $29 million. 12 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following discussion and analysis is based upon and should be read in conjunction with the historical consolidated financial statements of the Company and related notes thereto. The Company's fiscal 2000 second quarter ended July 31, 1999 and fiscal 1999 second quarter ended August 1, 1998. The fiscal 2000 and 1999 quarters each consisted of 13 weeks. RESULTS OF OPERATIONS FISCAL 2000 COMPARED WITH FISCAL 1999 Net Sales. Consolidated net sales for the second quarter and first half of fiscal 2000 of $117.2 million and $238.7 million represents a decrease of 6.3% and 2.5%, respectively, over the same periods of the prior year. This was the net result of continued softness in demand for commercial products, and a slow down for medical device products in the second quarter from the first quarter pace of fiscal 2000. Gross Profit. Gross profit as a percentage of sales for the second quarter and first half of fiscal 2000 was down 0.2% and up 0.4% from the same periods of the prior year to 31.9% and 32.0%, respectively. Despite lower volumes, the favorable impact of continued productivity improvements and cost containment along with a favorable product mix in the commercial segment were more than offset by weaker margins in the medical segment resulting from unfavorable volume and product mix. Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of sales, for the second quarter and first half fiscal 2000, were 22.4% and 22.7%, down from 23.4% and 23.2%, respectively, from the same periods a year ago. In terms of dollars, the decrease in selling, general and administrative expenses is mainly the net result of lower general and administrative expenses in several categories, including lower labor and incentive compensation, amortization, depreciation, and travel expenses, which were partially offset by higher outside services expense. Research and development expenses of $3.3 million and $6.7 million for the second quarter and first half fiscal 2000, respectively, decreased $0.2 million and $0.6 million, or 4.4% and 7.7%, from the same periods the prior year. The decrease in research and development expenses was primarily due to lower labor expense, and a reclassification of certain expenses to selling expense. Other Income, Expense. Other income, of $1.1 million and $1.7 million for the second quarter and first half of fiscal 2000, respectively, increased $0.1 million and decreased $0.4 million over the same periods of the prior year. The decrease primarily resulted from a legal settlement included in the prior year, that was not repeated this year. Somewhat offsetting this was increased royalties income and a reduction in foreign exchange transaction losses in both periods of the current year over prior year periods. Interest Expense, Net. Interest expense, net, of $2.9 million and $5.9 million for the second quarter and first half fiscal 2000 decreased by $0.4 million and $0.3 million from the same periods the prior year, primarily as a result of decreases in the Company's outstanding debt. 13 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) Income Before Income Taxes. Pretax results of operations improved by 7.5% to $9.3 million and 8.1% to $17.9 million for the second quarter and first half of fiscal 2000 over the same periods a year ago. This improvement was achieved despite a decrease in volumes, primarily due to the impact of continued productivity improvements and cost containment actions in the commercial segment and lower operating and interest expense, somewhat offset by softer margins in the medical segment reflecting unfavorable product mix and volume. Provision for Income Taxes. The Company's effective tax rate for the three and six months ended July 31, 1999 was 23.8% and 27.5%, respectively, and 31.5% for the same periods in the prior year. The lower effective tax rates in the current year are primarily due to lower foreign income taxes resulting from the reorganization of foreign entities. SEGMENT RESULTS A discussion of the operations of the business segments follows. The Company operates in two business segments: Commercial Products, including highly engineered seals and bearings, fluid handling components, tapes, films and coated fabrics, hose and tubing, wire and cable, and plastic formed components; and Medical Device Products, including critical care products and infusion systems for medical and surgical applications. For additional financial information about industry segments, see Note 9 of the "Notes to Consolidated Financial Statements" contained herein. COMMERCIAL PRODUCTS
Three Months Ended Six Months Ended July 31, August 1, July 31, August 1, In thousands 1999 1998 1999 1998 - -------------------------------------------------------------------- Sales $ 92,035 $ 96,544 $185,411 $194,518 Operating profit 9,979 8,731 17,952 18,323
Net Sales. Commercial net sales for the second quarter and first half of fiscal 2000 decreased $4.5 million, and $9.1 million or 4.7% over the same periods of the prior year. Domestically, sales to heavy-duty truck, semiconductor, telecommunications, coating and laminating and industrial machinery markets were particularly strong during the current quarter compared to the same period of the prior year. Continued softness in the industrial processing market, impacted primarily by the lack of major capital projects due to low global oil prices, and commercial aircraft and material technology markets contributed to lower shipments for the second quarter and first half fiscal 2000 over the same periods of the prior year. Demand in Europe weakened during the current quarter, resulting in decreased dollar net sales of 18.3% (a 14.7% decrease after removing the effect of foreign currency exchange rate changes) over the same period the prior year. 14 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) Gross Profit. The gross profit margin for the second quarter and first half of fiscal 2000 was 30.5% and 30.0%, respectively, an increase from 29.8%, over same periods of the prior year. This was a net result of lower material costs and improved direct labor productivity, partially offset by slight increase in fixed overhead. Selling, General and Administrative Expenses. SG&A expenses as a percentage of net sales decreased 1.1% to 19.7% and remained flat, respectively, for the quarter and first half of fiscal 2000 from the same periods of the prior year. Lower general and administrative expenses in several categories, including lower labor and incentive compensation, amortization, depreciation, and travel expense, were partially offset by higher outside services expenditures. Operating Profit. Operating profit, increased 14.3% to $10.0 million and decreased 2.0% to $18.0 million for the second quarter and first half ended July 31, 1999 from the same periods of the prior year. The improvement in profitability reflects improved margins, on lower volumes and reduced operating expenses. MEDICAL DEVICE PRODUCTS
Three Months Ended Six Months Ended July 31, August 1, July 31, August 1, In thousands 1999 1998 1999 1998 - ---------------------------------------------------------------- Sales $25,186 $28,502 $53,247 $50,333 Operating profit 1,103 2,195 4,123 2,308
Net Sales. Net sales for the second quarter and first half fiscal 2000 decreased $3.3 million, or 11.6% and increased $2.9 million or 5.8%, respectively, over the same periods of the prior year. Domestically, new product introduction and delivery delays and pricing pressures particularly in fluid and drug, and vascular access product lines contributed to the lower volumes. Pressure monitoring sales increased as the LogiCal reusable pressure transducer continues to be successful as the market recognizes the benefits of this product. Current fiscal year first half sales exceeded the same period of the prior year, primarily due to increased demand in the pressure monitoring product line. Current quarter sales in Europe decreased 13%, primarily as a result of the loss of a major account and pricing pressures in Germany. The impact on sales of unfavorable foreign exchange fluctuations was minimal for the second quarter and first half of fiscal 2000. Gross Profit. The gross profit margin for the quarter ended July 31, 1999 was 36.7% as compared to 40.0% for the same period of the prior year. Lower volumes impact on overhead and pricing were chiefly responsible. Gross profit margin for the first half ended July 31, 1999 was 38.7% as compared to 38.8% for the same period of the prior year. 15 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) Selling, General and Administrative Expenses. SG&A expenses as a percentage of net sales for the second quarter and first half of fiscal 2000, were 32.3% and 31.0%, respectively. This represents a real dollar improvement over the 32.3% and 34.2% for the quarter and first half of fiscal 1999, respectively. This is the net result of lower general and administrative headcount and associated employee related expenses, somewhat offset by higher selling expenses. Operating Profit. Operating profit, decreased 49.8% to $1.1 million and improved 78.6% to $4.1 million, respectively, for the quarter and first half of fiscal 2000 from the same periods of the prior year. For the quarter, this reflects the unfavorable impact of lower volumes and pricing pressures, slightly offset by lower operating expenses. The first half reflects the favorable impact on margins of higher volumes, further assisted by decreased operating expenses. LIQUIDITY AND CAPITAL RESOURCES The Company's financial condition remained strong at July 31, 1999. The ratio of current assets to current liabilities was 2.5 to 1.0, an improvement from 2.3 to 1.0 at January 30, 1999. Net working capital of $90.7 million increased by $5.2 million from January 30, 1999. Cash Provided by Operating Activities. Cash provided by operations for the second quarter and first half of fiscal 2000 was $12.3 million and $24.5 million, respectively, compared with $16.6 million and $20.1 million provided in the same periods of the prior year. The increase in the first half of fiscal 2000 compared with the first half of fiscal 1999 is primarily the result of increased net income of $1.6 million, net sources of cash from changes in working capital and a source of cash from deferred income taxes of $1.5 million due to the realization of reserve accounts. Cash Used in Investing Activities. Cash used in investing activities for the second quarter and first half of fiscal 2000 was $3.8 million and $8.2 million, respectively, compared with $18.0 million and $20.8 million used in the same periods of the prior year. This change was due primarily to the acquisition of Corotec GmbH during April 1998 and lower capital expenditures in both the second quarter and first half of fiscal 2000 compared to the same periods of the prior year. Cash used in investing activities for the first half of fiscal 1999 included cash balances of $3.0 million obtained in the Corotec acquisition. During the first half of fiscal 2000, the Company invested $7.9 million in renovation of existing facilities, leasehold improvements and the replacement of existing equipment. Capital expenditures for the first half of fiscal 2000 decreased $2.0 million from $9.9 million in the first half of fiscal 1999. The Company believes that it generates sufficient cash flow from its operations to finance near and long-term internal growth and capital expenditures and to make principal and interest payments on its loans payable to banks and the senior subordinated notes. The Company continually evaluates its employment of capital resources, including asset management and other sources of financing. 16 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) YEAR 2000 READINESS DISCLOSURE THE STATEMENTS SET FORTH BELOW ARE "YEAR 2000 READINESS DISCLOSURES" WITHIN THE MEANING OF THE YEAR 2000 INFORMATION AND DISCLOSURE ACT AND INCLUDE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND ARE EXPRESSLY QUALIFIED AS DESCRIBED BELOW UNDER "STATEMENT REGARDING FORWARD LOOKING DISCLOSURE." THE YEAR 2000 PROBLEM The so-called "Year 2000 (or Y2K) Problem" arises from information and non-information technology systems, equipment and products that process date/time data and concerns their ability to do so accurately, including calculating, comparing and sequencing data from, into and between the twentieth and twenty-first centuries, the years 1999 and 2000, and leap years. A system, equipment or product that processes date/time data will be considered "Year 2000 (or Y2K) compliant" if it is able to accurately process the date/time data in all material respects. Similarly, a third party upon which the Company depends will be considered Y2K compliant if its relevant internal and external systems, equipment, products and services are Y2K compliant. The failure of the Company's date/time dependent systems, equipment or products, or those of a third party upon which it depends, to be Y2K compliant could affect the Company's ability to conduct its business in the ordinary course which, in turn, could have a material adverse effect on the Company's business, financial condition or results of operations. OVERVIEW OF THE COMPANY'S Y2K READINESS PROGRAM The Company first began addressing the Y2K Problem in 1994 in connection with a reorganization of its operations. Since then, to implement the new organization and assimilate subsequent acquisitions and other changes, the Company has replaced substantially all of its information technology systems and equipment with new items that are Y2K compliant. In 1997, the Company formed a cross-functional Year 2000 Compliance Team which began to develop and implement its current Y2K Readiness Program covering all of the areas described below. Today, all of the Company's business functions are involved in a comprehensive effort to minimize, if not in some cases eliminate, the Year 2000 Problem as it impacts their internal and external customers. 17 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) YEAR 2000 READINESS DISCLOSURE (CONTINUED) The Company has generally divided its Program into three phases to address the Year 2000 Problem, with a particular emphasis given to "mission critical" systems, equipment, and suppliers and other third parties. The Company defines a "mission critical" system or equipment as one which must be working properly to enable the Company to meet commitments to customers or other third parties in a timely manner and without having to materially increase costs. A "mission critical" supplier or other third party is one where it is reasonably likely that if they fail to supply their products or services timely and completely due to their Y2K problems or those of a third party upon which they depend, it would materially delay the Company's product/service delivery schedule, materially increase the Company's costs or otherwise have a material adverse effect on the Company. The three phases of the Company's Y2K Readiness Program generally are: o Inventory and Assessment. Identify all of the Company's systems, equipment, products, suppliers and other relevant third parties potentially impacted by the Y2K Problem, determine which of them are mission critical and determine the likely nature and extent that mission critical items and entities and selected others will be impacted. o Remediation and Validation. Make the necessary changes to make mission critical and selected other items Y2K compliant. For the Company's mission critical systems and equipment, perform systems testing to ensure they are Y2K compliant and for selected mission critical suppliers and other relevant third parties, independently audit their relevant operations to confirm Y2K compliance. o Contingency Planning. Determine the need for a contingency plan for mission critical items and develop a plan for those that are selected. PRODUCTS The products currently offered for sale by the Company either are not designed to process date/time data or are not functionally dependent on that data and, thus, there are no material Y2K Problems with respect to the performance of any of them. Similarly, the Company believes that there are no material Y2K Problems with respect to the performance of any of its past products that are likely to still be in use. INFORMATION TECHNOLOGY SYSTEMS AND EQUIPMENT The status of the Company's Program with respect to its "Information Technology Systems and Equipment" (i.e., all of its (1) business information systems (applications, utility, systems management tools and operating system software programs; middleware; firmware; hardware (including mid-range, mini-and personal computers, servers and related BIOS, other chips and microcode)) and (2) technical infrastructure (network, intranet- and internet-related, and telecommunications equipment and related software programs)) is as follows: 18 19 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) YEAR 2000 READINESS DISCLOSURE (CONTINUED) o Inventory and Assessment. Completed. o Remediation and Validation. Completed. o Contingency Planning. Completed, although the plan may be modified or further refined over the balance of the year. The plan currently includes provisions for (1) European system backup and redundant U.S. system backups on December 31, 1999 at two separate locations, (2) manual systems that do not rely on computers and (3) "swat" teams which starting Saturday, January 1, 2000, will be either at each site or on standby and who will be selectively re-testing mission critical items. The Company also has designated Monday, January 3, 2000, as one of its New Year's holidays to provide additional time for the swat teams to remediate potential Y2K failures. NON-INFORMATION TECHNOLOGY SYSTEMS AND EQUIPMENT The status of the Company's Program with respect to its "Non-Information Technology Systems and Equipment" (i.e., all of its systems and equipment which are not "Information Technology Systems and Equipment, including: machinery and equipment used in the research, development, testing, servicing or production of its products; elevators; plant heating, cooling and other non-IT systems; emissions and other pollution control systems; fire; security systems; etc.) is as follows: o Inventory and Assessment. Completed. o Remediation and Validation. Completed. o Contingency Planning. Completed, although the plan may be modified or further refined over the balance of the year. The plan currently includes provisions similar to those for the Information Technology Systems and Equipment. SUPPLIERS The status of the Company's Program with respect to its "Suppliers" (i.e., all third party raw material and other suppliers, vendors, utilities (electric, water, trash, gas, etc.), telecommunication providers, transportation services, and other non-governmental third parties upon whose products or services the Company depends to conduct its business (excluding distributors and independent sales representatives which are discussed below)) is as follows: o Inventory and Assessment. The Company has identified all of its mission critical Suppliers and requested Y2K compliance assurances from each of them. Over 80% have stated they expect to be Y2K compliant at varying times prior to January 1, 2000, with over 80% of those Suppliers indicating they are currently compliant. The Company is following up with all of those who have not responded or indicated an expected compliance date. 19 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) YEAR 2000 READINESS DISCLOSURE (CONTINUED) o Remediation and Validation. So far, none of the Company's mission critical Suppliers have stated they will not be Y2K compliant. The Company has performed a subjective risk assessment of its mission critical Suppliers (excluding utilities and telecommunication providers) who are sole or limited source, are thinly capitalized, have indicated a stated Y2K compliance date later than June 30, 1999, or have not stated they will be Y2K compliant by December 31, 1999. Based on that assessment, the Company selectively audited those that it believes pose the greatest risk. o Contingency Planning. The Company has developed a preliminary written contingency plan for all of its mission critical raw material Suppliers and for each of its other mission critical Suppliers which it believes poses a significant risk. The Company expects to refine and finalize the plan over the balance of the year, especially with respect to those Suppliers that it believes pose a significant risk. For those who are raw material Suppliers, the contingency plan currently involves the stockpiling in the months before January 1, 2000 of levels of raw material subjectively determined by the Company in light of the degree of perceived risk. Depending on the circumstances, other raw material and service Supplier contingencies may include using other compliant Suppliers or raw materials/services which are already qualified as secondary sources or qualifying new material/services from existing or new compliant Suppliers. The Company also has developed contingency plans for isolated Y2K failures of its utilities or telecommunication providers, which in addition to the items described above for the Company's systems and equipment, currently primarily involve identifying alternative sources, if possible. However, the Company does not intend to develop or implement further contingency plans for extended or widespread local, regional or national utility, telecommunication or similar provider failures. The Company believes that even if it is possible to develop effective plans for those risks, they would require significant expenditures that, in the Company's view, are not warranted in light of the perceived risk and potential benefits. DISTRIBUTORS AND INDEPENDENT SALES REPRESENTATIVES The Company is in the process of surveying its authorized distributors and independent sales representatives to determine their state of Y2K readiness. The Company expects to complete this assessment by December 31, 1999. In the event a distributor or independent sales representative is not Y2K compliant and, as a result, is materially unable to perform services for the Company in the ordinary course, the Company may replace them or seek to sell direct. 20 21 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) YEAR 2000 READINESS DISCLOSURE (CONTINUED) CUSTOMERS The Company is in the process of determining the state of Y2K readiness of customers representing over half of its annual net sales for each of its segments. For those that are public companies, the Company is reviewing their public filings to determine their state of readiness. The Company also intends to survey certain of its key customers directly to determine their state of Y2K readiness. The Company expects to complete this assessment by December 31, 1999. For the year ended January 30, 1999, no single customer accounted for more than 4% or 8%, respectively, of the Company's net sales of Commercial and Medical Device products. COSTS The Company estimates that to date it has directly incurred the following costs to address the Y2K Problem: (1) approximately $260,000 of capital expenditures and other out-of-pockets costs; (2) an undetermined amount for internal time; and (3) miscellaneous communications (postage, fax, etc.) and other immaterial costs. In addition, the Company expended approximately $9 million between 1994 and 1998 replacing Information Technology Systems and Equipment with systems and equipment that are Y2K compliant and has expended approximately $1.7 million, and expects to have recurring operating costs of approximately $1.1 million per year, to lease upgraded personal computers. However, these latter expenditures and operating costs were scheduled to occur without regard to the Y2K Problem or the Company's Program. RISKS The Company owns a small business in England with annual sales of less than $10 million (the "Business"), which the Company was in negotiations to divest prior to year end. As a result the Business was not previously included in the Company's Y2K Readiness Program. Since it now appears that the divestiture will not be completed before year end, the Company has added the Business to its Y2K Program, and the Company is in the process of determining the Y2K status of the Business. None of the products manufactured by the Business are date/time sensitive. The Company expects to complete the three phases of Y2K review and remediation described above with respect to the Business by year end, and does not anticipate that costs associated with remediating identified problems will be material. The description of the Company's Y2K readiness set forth above does not include the Business. 21 22 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) YEAR 2000 READINESS DISCLOSURE (CONTINUED) The Company believes that the most significant Y2K-related risks it faces include (1) unanticipated Supplier failures, especially involving breakdowns of utilities, transportation, telecommunications and similar services, (2) foreign or domestic customs failures, (3) other foreign or domestic government failures, (4) failures of foreign or domestic banking or financial systems, (5) any other failures beyond our reasonable control and (6) unanticipated failures on our part to address Y2K-related issues. The most reasonably likely worst case scenario in light of these risks would involve a potential loss in sales resulting from production and shipping delays caused by Y2K-related disruptions and the potential costs of related legal proceedings. The degree of sales loss and associated costs would likely depend on the severity of the disruption, the time required to correct it, whether the sales loss was temporary or permanent, and the degree to which our primary competitors were also impacted by the disruption. However, subject to the risks and other cautionary statements noted above and elsewhere in this document, at this time the Company does not anticipate that the Y2K Problem will have a material adverse effect on the Company's business, financial condition or results of operation, although no assurance to that effect can be given. EURO CONVERSION Eleven of the fifteen member countries of the European Monetary Union agreed to adopt the euro as their common legal currency commencing January 1, 1999. Fixed conversion rates between these participating countries' present currencies, or "legacy currencies", and the euro were established as of January 1, 1999. The legacy currencies are scheduled to remain legal tender in the participating countries as denominations of the euro until January 1, 2002. Beginning January 1, 2002, the participating countries will issue new euro-denominated bills and coins. No later than July 1, 2002, the participating countries will withdraw all bills and coins denominated in their legacy currencies. Transition to the euro creates a number of issues for the Company. Business issues that must be addressed include product pricing policies and ensuring the continuity of business and financial contracts. The increased price transparency resulting from the use of a single currency may affect the ability of the Company to price its products differently in the various European markets. For the six months ended July 31, 1999, approximately 15% of the Company's net sales were made to countries that have agreed to adopt the euro as their currency. Finance and accounting issues include the conversion of accounting systems, statutory records, tax books and payroll systems to the euro, as well as conversion of bank accounts and other treasury and cash management activities. While the Company is still in the process of assessing potential issues caused by conversion to the euro and possible ways to resolve those issues, based on the information currently available to it, the Company does not expect that conversion to the euro will have a material adverse impact on its results of operations, financial position or liquidity. 22 23 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) OTHER CONTINGENCIES For information regarding environmental matters and other contingencies, see Note 6 of the "Notes to Condensed Consolidated Financial Statements" and the "Risk Factors" section of the Company's 1999 Annual Report on Form 10-K. STATEMENT REGARDING FORWARD LOOKING DISCLOSURE This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements that include the words "believes," "expects," "anticipates," or similar expressions and statements relating to anticipated cost savings, the Company's Year 2000 readiness effort and progress toward that goal, the Company's Year 2000 Readiness Disclosure, Euro conversion, Quantitative and Qualitative Disclosures About Market Risk, the Company's strategic plans, capital expenditures, industry trends and prospects and the Company's financial position. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to differ materially from those expressed or implied by such forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. For a more complete discussion of risk factors, please refer to the "Risk Factors" section of the Company's 1999 Annual Report on Form 10-K. All written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Form 10-Q and cautionary statements and the "Risk Factors" section in the Company's 1999 Annual Report on Form 10-K. 23 24 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk disclosures set forth in the Company's 1999 Annual Report on Form 10-K have not changed significantly through the six months ended July 31, 1999. 24 25 PART II - OTHER INFORMATION --------------------------- ITEM 1. LEGAL PROCEEDINGS. Not applicable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Annual Meeting of the Shareholders of the registrant was held on June 8, 1999. The following matters were voted upon and approved at the meeting:
Votes Cast ----------------------------------- Broker Matter For Against Withheld Abstentions Nonvotes - ---------------------------------------------- ---------- ------- -------- ----------- -------- 1. Election of Class III Directors: J. Michael Hagan................... 15,858,124 -- 156,395 -- -- Peter Churm........................ 15,855,717 -- 158,802 -- -- William D. Cvengros................ 15,858,130 -- 156,389 -- -- 2. Ratification of the Appointment of Ernst & Young LLP as the Company's Independent Auditors for the Fiscal Year Ending January 29, 2000....................... 15,184,763 26,317 -- 803,439 --
ITEM 5. OTHER INFORMATION. Not applicable. 25 26 PART II - OTHER INFORMATION (CONTINUED) --------------------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 10.3A* Amendment 1999-3 to Supplemental Executive Retirement Plan 27 Financial Data Schedule. (b) Reports on Form 8-K: None * A management contract or compensatory plan or agreement. 26 27 PART II (CONTINUED) ------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FURON COMPANY REGISTRANT ------------------------------ /S/ MONTY A. HOUDESHELL /S/ DAVID L. MASCARIN - --------------------------------------- --------------------------- Monty A. Houdeshell David L. Mascarin Vice President, Chief Financial Officer Controller September 3, 1999 27 28 EXHIBIT INDEX ------------- Exhibit Number Description ------- ----------- 10.3A* Amendment 1999-3 to Supplemental Executive Retirement Plan 27 Financial Data Schedule. EX-10.3A 2 AMDNT 1999-3 TO SUPPLEMENTAL EXE. RETIREMENT PLAN 1 Exhibit 10.3A - ------------- AMENDMENT 1999-3 FURON COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN WHEREAS, Furon Company ("Company") maintains the Furon Company Supplemental Executive Retirement Plan ("Plan"); and WHEREAS, the Company has the right to amend the Plan; NOW, THEREFORE, this Amendment 1999-3 is hereby adopted, effective June 1, 1999. The following is hereby added to the end of Appendix A: "Notwithstanding any other provision of the Plan or this Appendix A, Dominick A. Arena shall cease to be a Participant in this Plan as of June 1, 1999. Mr. Arena shall not be entitled to any benefits under the Plan, including but not limited to benefits which may have otherwise accrued or become vested as a result of an Event under the Plan. Mr. Arena's removal as a Participant shall be effective regardless of any current or future relationship he may have with the Company, including but not limited to a relationship of employee, consultant, joint venturer, partner or independent contractor." IN WITNESS WHEREOF, this Amendment 1999-3 is hereby adopted this 1st day of June, 1999. FURON COMPANY By ------------------------------ Its ------------------------------ EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Company's unaudited condensed statements of income, condensed balance sheets and condensed statements of cash flows and is qualified in its entirety by reference to such financial statements contained within the Company's Form 10-Q for the three and six months ended July 31, 1999. 1,000 6-MOS JAN-29-2000 JUL-31-1999 2,927 0 74,550 1,920 60,606 150,657 218,154 111,298 353,828 59,964 3,400 0 0 43,832 72,080 353,828 238,658 238,658 162,334 216,583 (1,878) 94 6,067 17,886 4,919 12,967 0 0 0 12,967 0.71 0.70
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